Substantiating Business Driving the Right Way

Small business owners can use their personal vehicles for business purposes. This is perfectly advisable from a cost saving perspective, and is also permissible for tax purposes. The only problem: in order to deduct the cost of commercial driving, you must justify the commercial use of the vehicle. The tax rules are very strict about what this means. There is a right way and a wrong way to do it.

Records must be contemporary

This means that the required information must be entered in a logbook, application or other record at or near the time of each business trip in the vehicle. In a case, a contractor created his mileage log solely for use when he was audited; the entries were not made concurrently with the commercial use of his Mercedes. Also, his record was a calendar with minimal notations on business appointments; not good enough as you will see.

Information required

It is not enough to write down the date and the number of kilometers traveled for business purposes for tax purposes. The says the IRS you must consider:

  • The date
  • The destination (city, town or area)
  • The commercial purpose
  • The odometer reading at the start and end of each trip (total miles of the trip)
  • Expenses: Type (eg, oil, gas) and amount, unless the IRS standard mileage rate (explained below) is used.

If you choose to deduct the IRS standard mileage rate instead of actual expenses, you still need to keep a record of all non-expense information. For 2022, the standard mileage rate is 58.5¢ per mile for business driving in the first half of the year and 62.5¢ per mile in the second half of the year. Again, using the standard mileage rate does not relieve you of the requirement to record all other information about each business trip.

Sample for record keeping

Instead of recording information for every business trip to your vehicle, you can keep a proper record for parts of a tax year and use that record to prove the amount of business use throughout the year. This is called ‘sampling’ and you must be able to show that the periods for which a proper record is kept are representative of use over the course of the tax year. For example, you drive about the same number of business miles each month throughout the year. If you keep detailed records for the first three months, you can extrapolate your mileage for the entire year. Similarly, if you track mileage during the first week of each month, your weekly records can be used to show the total business driving for the month.

The IRS gives this example: You use your car to visit customer offices, meet with suppliers and other subcontractors, and pick up and deliver items to customers. There is no other commercial use of the car, but you and your family use it for personal purposes. Keep proper records during the first week of each month that show that 75% of the car’s use is for business. Invoices and bills show that your business usage continues at the same rate during the last few weeks of each month. Your weekly records are representative of the car’s use each month and are sufficient evidence to support the percentage of business use for the year.

Accrediting documentation of actual expenses

If you don’t use the standard mileage rate to figure your deduction for the cost of business driving and instead deduct your actual costs, you’ll need to keep receipts, canceled checks, card statements of credit, invoices or other documentary evidence of the cost of expenses related to business use. This is in addition to the mileage log and other information mentioned above.

Distinguish between personal and business driving

The cost of driving for personal purposes is not tax deductible. You cannot deduct the cost of commuting, which is a non-deductible personal expense. Track miles from your office to any business-related location, such as seeing a customer or vendor, going to the bank or post office, or buying supplies. If your business is at home, then you travel from home to any business-related destination and it counts as a business trip again.


Be sure to note that only the self-employed can deduct the cost of business driving. Owners of corporations who are employees cannot deduct their costs on their personal returns, but they can arrange to be reimbursed by their companies through a responsible plan; this requires the same justification. Of course, it takes some effort to keep proper records of business driving, but it’s worth it. Imagine if you’re self-employed driving 8,000 miles for business in 2022 (assuming the same miles each month) and using the IRS standard mileage rate, you can deduct $4,840. This is nothing.

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